Would you judge the health of a football team by how many players it could cram on its books? Sure, the number of players available goes up, but if none of them can pass, shoot or defend properly, it hardly counts as progress.
That, in essence, is the trick played whenever pundits conflate headline GDP – that is, the nation’s grand total GDP – with prosperity. On Newsnight this week, The Times’ Economics Editor, Mehreen Khan, argued that Britain’s growth prospects depend on importing more migrants. More people equals more output: problem solved.
Except it isn’t. What matters isn’t the size of the team, but how well it plays. Economists have a measure for that: GDP per capita – that is per person. By that metric, Britain is now well into a second decade of economic stagnation and lost growth. Wages are flat, productivity barely moves and public services are constantly stretched to breaking point, all while immigration fuels population growth. Simply adding more people to the denominator doesn’t fix the underlying malaise.
Immigration is often pitched as a quick fix for growth. It’s certainly true that bringing in more workers increases the size of the economy in absolute terms. The UK population has risen by about 10 million since 2000, 70% of it due to net migration, and headline GDP has risen. But the question isn’t whether GDP rises, but whether the living standards of the average Briton do.
Here, the evidence is much murkier. The Office for Budget Responsibility admits that immigration has only a modest impact on long-run GDP per capita. Within the OBR’s migration projections for the future, where net migration falls by around 160,000 from its current level to settle at 515,000 a year, by 2028-29, the UK would expect to see a boost to GDP by 2.2% and a mere 0.8% increase to GDP per person. And this is only under the assumption that the additional migrants would mostly arrive on work visas and have a much higher participation (i.e. employment) rate than the adult UK population (around 90% rather than 63%).
Certainly, immigration has helped to fill critical gaps in areas such as NHS staffing. But, recent immigration hasn’t been dominated by the highly-skilled workers who could boost productivity. Instead, much of the surge has come from dependents and low-paid workers, concentrated in sectors such as social care, hospitality and agriculture. The issue is not immigration itself, but how it is managed and integrated to support productivity and living standards.
The fiscal impact of migration still depends heavily on skill levels. High earners pay more in taxes than they consume in services like education and healthcare; low earners do the opposite, while dependents contribute little and consume a great deal. According to the Migration Advisory Committee’s 2024 Annual Report, migrants arriving through skilled-worker routes tend to be net contributors, often more so than the typical British adult. In contrast, migrants entering via other routes are less likely to contribute positively. The uncomfortable truth is that Britain has been importing fiscal liabilities as well as economic assets.
At the same time, we have neglected the enormous potential of those already here. Nearly 9 million working-age Britons are classed as ‘economically inactive’. That figure does include students, stay-at-home mums, carers, the disabled and the long-term sick, but within it lies a sizeable group who could, with the right reforms, rejoin the workforce.
The sharp rise in inactivity due to long-term sickness – now over 2.5 million – is particularly troubling. Not everyone classed as ‘long-term sick’ needs to be so. Much of this is linked to NHS waiting lists, which trap people in limbo without the treatment or advice they need to work. Tackling that backlog would do more for growth than simply importing more workers. Likewise, better retraining and upskilling could help those displaced by technological change to re-enter productive employment.
Instead of seeing immigration as the only lever for growth, policymakers should be asking: how do we mobilise the under-used resources of our own citizens? Welfare reform and the clearing of bottlenecks may seem unglamorous, particularly politically, but they could be a route to real prosperity.
Another common economic case for high immigration, albeit not the focus of the Newsnight interview, is that it is needed to prop up Britain’s aging population. More young workers, we’re told, will pay the taxes to fund pensions for the elderly.
But this is demographic sleight of hand. Migrants too grow old. They too draw pensions. They too need healthcare. Using immigration to hold up a fledgling, unreformed pay-as-you-go pension system is like topping up a leaking bucket – the flow in never quite keeps up with the flow out. To maintain the ratio of workers to retirees via immigration alone, Britain would have to admit implausibly high numbers year after year (even more so than we do already).
Britain faces a choice. We can continue to chase headline GDP growth by piling more people into an already stretched economy, congratulating ourselves on figures while ignoring stagnant living standards. Or we can focus on the harder but ultimately more rewarding path of increasing GDP per capita by raising productivity.
That means abandoning the comforting fiction that immigration is a free lunch. It isn’t. It brings costs as well as benefits, and in its current form is not delivering the prosperity its champions promised. The real work lies in getting Britain’s own house in order. Only then will we have an economy that works for the people who live in it.
